Kawasaki Kisen Sits Out Rush to Add Bigger Container Vessels

Jiro Asakura, president and chief executive officer of Kawasaki Kisen Kaisha Ltd., poses for a photograph next to a model of the company's container ship following an interview in Tokyo. Photographer: Akio Kon/Bloomberg

July 1 (Bloomberg) -- Kawasaki Kisen Kaisha Ltd., Japan’s
No. 3 container line, said it may take as long as a year to
decide on plans for adding larger vessels, even after its two
main local rivals signed deals to add big box ships.

“We’re not in a hurry,” President Jiro Asakura said in an
interview in Tokyo on June 29. “We will use large container
ships in line with the industry trend, but we’re going to think
about when and how.”

A delay will let the company assess the market and work out
the best mix of chartered and purchased vessels, Asakura said,
without elaborating on how many ships it may add. In the past
two months, Mitsui O.S.K. Lines Ltd. and Nippon Yusen K.K. have
both agreed to contracts for vessels that carry more than 10,000
containers to help pare operating costs.

“Larger ships are more fuel-efficient, but they are very
difficult to fill,” said Ryota Himeno, an analyst at Mitsubishi
UFJ Morgan Stanley Securities Co. “It may pay to take your time
and ensure you have the customers for the extra capacity.”

A total of 167 vessels able to carry 10,000 twenty-foot
containers or more are on order worldwide, according to data
from shipbroker Clarkson Plc. This year, A.P. Moeller-Maersk A/S
has ordered 20 vessels able to carry 18,000 boxes, which will be
the biggest afloat.

K-Line’s container unit accounts for about 45 percent of
sales at the company, which also operates commodity vessels and
car transporters.

Shedding Capesizes

The company’s shares fell 0.7 percent to 278 yen at the 3
p.m. close of trade in Tokyo today. K-Line has tumbled 22
percent this year, compared with an 18 percent decline for
Nippon Yusen and a 22 percent drop for Mitsui O.S.K.

In its dry-bulk business, K-Line plans to sell “a few” of
its 80 capesize ships because of plunging rates, Asakura said.
The vessels to be shed will be among the 10 the line operates in
the spot market, he said, without elaborating on a time frame
for a sale.

Spot rates for capesizes have tumbled because of slowing
demand in China and a surge in new vessels entering service.
That has prompted shipowners to scrap 48 capesizes this year
through June 24, more than double 2010’s full-year tally of 18,
according to Clarkson. Capesizes carry about 170,000 tons of
cargo on average.

Container Surcharges

Shipping lines also face higher costs after fuel prices
jumped 54 percent in the past 12 months alongside an increase in
oil prices. K-Line’s container arm plans to raise rates by $300
per 20-foot box on European routes from Aug. 1 to help recoup
rising costs, Asakura said. It will also levy a peak-season
surcharge of $400 per 40-foot container on U.S. routes from July
15, he said.

Still, the company expects current profit at its container
division to slump to breakeven in the year ending March 31 from
29 billion yen a year earlier, when demand surged following the
end of the global recession.

The company’s car-shipping division will likely make a loss
in the six months ending September, Asakura said, after Japan’s
March 11 earthquake disrupted auto production. Vehicle exports
plunged 68 percent from a year earlier in April, the biggest
drop since the Japan Automobile Manufacturers Association began
keeping figures in 1973.

The unit, whose customers include Toyota Motor Corp. and
Honda Motor Co., will likely make a profit in the second half of
the fiscal year ending March, Asakura said.

“We won’t have a problem returning to the black,” he said.
“The automakers are moving back to full production.”